Rio Tinto’s Q1 Sees Slower Demand From China, Weather Weighs On Production

by Trefis Team
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Rio Tinto (NYSE:RIO), the world’s second largest iron ore producer, released its quarterly operations review report on Tuesday. Unfavorable weather has led to an overall decline in the company’s output. However, the company said that operations are now back on track. [1] The slowdown in China’s economic growth has resulted in lower demand, which has added to the worries of miners like Rio Tinto, Vale (NYSE:VALE) and Freeport McMoran (NYSE:FCX). Rio Tinto’s forecast for 2012 iron ore production now stands at more than 250 million tons.

See full analysis for Rio Tinto here

Below is a brief overview of Rio Tinto’s operations review:

  • Iron Ore: Global iron ore production was 59 million tons, down 11% sequentially but up 9% from the prior year quarter. Global iron ore shipments lagged production, at 54 million tons, due to tornadoes and flooding in Western Australia.
  • Copper: Mined copper was down significantly, by 13% and 18%, from Q4 2011 and Q1 2011, respectively, primarily reflecting lower grades.
  • Bauxite & Alumina: Bauxite production was down up 7%, while alumina production increased by 2% from the fourth quarter of 2011.
  • Aluminum: Aluminum production was down 11% on a quarter-over-quarter basis and 9% on a year-over-year basis mainly due to the company’s decision to realign its strategy and cut capacity at various plants.
  • Coal: Australian hard coking coal was down 35% from Q4 2011 and up 5% from the first quarter of 2011. Thermal coal production was down by 7% sequentially but 3% higher than Q1 2011.

Rio Tinto’s CEO stated that the company is well-positioned for the relatively strong markets in the first quarter, albeit with continued volatility as anticipated. [1] We expect that the company may see a decline in shipments throughout 2012 as a result of ongoing economic uncertainty. However, its fundamentals look positive and the long term growth potential remains robust.

We are in the process of revisiting our forecasts for Rio Tinto to reflect slower demand growth in China in addition to other factors.

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Notes:
  1. First quarter 2012 operations review, Rio Tinto, April 17 2012 [] []
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